Monday, July 13, 2009

Markets Attempt To Rally on Meredith Whitney Comments

The S&P 500 was lower overnight as it consolidates below the 25% retracement level of the March-June rally crossing at 882.35. Stochastics and the RSI are oversold but remain neutral to bearish signaling that sideways to lower prices are possible near term.

Market futures are attempting to rally as Meredith Whitney makes positive comments about the banks on CNBC this morning. She did go on to call for 13% unemployment and another 15-50% downside in home prices.

If September extends this month's decline, the 38% retracement level of the March-June rally crossing at 845.09 is the next downside target. Multiple closes above the 20 day moving average crossing at 898.31 are needed to confirm that a short term low has been posted.

Day traders are watching a potential break of the 884.50 level to give us a gap fill into the 894-896 area. If the pivot point holds for the bears the next short target is 857.75

From a broader perspective, the September S&P index appears to be forming a broad head and shoulders top. Closes below 873.10 would confirm a downside breakout of neckline support thereby opening the door for a possible test of the 38% retracement level of the March-June rally crossing at 845.09.

First resistance is the 10 day moving average crossing at 889.58. Second resistance is the 20day moving average crossing at 898.31.

First support is last Wednesday's low crossing at 865.50. Second support is the 38% retracement level at 845.09.

The September S&P 500 Index was down 1.30 points at 873.00 as of 5:56 AM CST. Overnight action sets the stage for a lower opening by the September S&P 500 index when the day session begins later this morning.